Old Pension vs New Pension Scheme 2023: Complete Details

Old Pension vs New Pension Scheme Check Differences & Definitions | Old Pension vs New Pension Scheme Check Features & Benefits | Old Pension vs New Pension Scheme Check Advantages & Disadvantages | Old Pension vs New Pension Scheme Check Documents & Some Other Schemes | Old Pension vs New Pension Scheme Check Eligibility & All Details |

The Old Pension Scheme is exclusively for government employees, while the New Pension Scheme is open to citizens aged 18 to 60, as well as government employees. The Old Pension Scheme guarantees a fixed pension, while the New Pension Scheme is subject to market risks. So here, we can understand the difference between Old Pension vs New Pension Scheme. The New Pension Scheme offers higher returns and portability, while the Old Pension Scheme provides stability and a guaranteed pension.

Through this article, we will provide you with all types of information about the Old Pension vs New Pension Scheme 2023 like purpose, Eligibility Criteria, Benefits, Features, important documents, etc. Apart from this, we will share with you the process to apply online for this scheme. To get complete information about this scheme, read this article till the end.

Old Pension vs New Pension Scheme

The government employees want the Old Pension Scheme (OPS) back, even though the newer New Pension Scheme (NPS) has its advantages. Both provide monthly pensions to government employees. Some states have already gone back to the old pension scheme. But which one is better? This will be understandable after analyzing the differences between Old Pension vs New Pension Scheme.

The Old Pension vs New Pension Scheme have their own advantages and disadvantages. While the Old Pension Scheme provides guaranteed retirement benefits to government employees, the NPS is a market-linked scheme with higher returns and portability. While some states have restored the old pension scheme, others prefer the NPS due to its flexibility and higher returns.

Highlights Of Old Pension vs New Pension Scheme

The highlights of this scheme are as follows:-

Objectives of Old Pension vs New Pension Scheme

The main objective of releasing an article on Old Pension vs New Pension Scheme is to provide clarity to government employees about the benefits and drawbacks of both schemes. With the introduction of the National Pension System (NPS), many government employees have been confused about which scheme to opt for. The article aims to provide a comprehensive comparison of both schemes.

Another objective of releasing an article on Old Pension vs New Pension Scheme is to highlight the importance of retirement planning and financial literacy. The article will educate employees about the need for retirement planning and the various options available to them. It will also emphasize the importance of financial literacy and how to make informed decisions about retirement planning.

What is the Old Pension Scheme?

The Old Pension Scheme is a retirement scheme for government employees in which a monthly pension is provided based on the last drawn salary. It is managed by the government and provides a fixed pension amount for a secure and stable source of income during retirement. No contributions are required from employees, and survivor benefits may be available. 

What is the New Pension Scheme?

The New Pension Scheme is a retirement scheme that is based on the contribution and employment period of the subscriber. It is market-linked, providing higher returns compared to the Old Pension Scheme. It is managed by private pension fund managers, offering more flexibility and portability. It also provides tax benefits and allows employees to choose their pension fund manager.

Differences Between Old Pension vs New Pension Scheme

The key differences between these 2 pensions are as follows:-

• Pension Amount:– The Old Pension Scheme provides a fixed pension amount based on the last salary, years of service, and government’s contribution. The New Pension Scheme, on the other hand, may provide higher returns as it is market-linked, but the final pension amount is subject to market performance.
• Eligibility Requirements:- The Old Pension Scheme is available to all government employees, while the New Pension Scheme is mandatory for government employees who joined after 2004.
• Pension Fund Management:- The Old Pension Scheme is managed by the government, while the New Pension Scheme is managed by Pension Fund Regulatory and Development Authority (PFRDA) and various pension fund managers.
• Flexibility and Portability:– The Old Pension Scheme does not offer any flexibility or portability, while the New Pension Scheme offers flexibility in terms of choosing pension funds and portability if an employee switches jobs.
• Guaranteed Pension:– The Old Pension Scheme provides a guaranteed pension amount, while the New Pension Scheme is subject to market risks and does not offer a guaranteed pension.
• Contribution:– Under the Old Pension Scheme, the government contributes to the pension fund, while under the New Pension Scheme, both the employee and the government make contributions.

Advantages & Disadvantages of Old Pension vs New Pension Scheme

The top 10 advantages & disadvantages of these both 2 pensions are as follows:-

Advantages of Old Pension Scheme

• Provides a fixed pension amount based on the last salary and years of service.
• Managed by the government, which can give employees a sense of security.
• No contributions required from employees.
• Provides a stable source of income during retirement.
• Helps employees plan their retirement with certainty.
• Reduces the burden on employees to save for retirement.
• Does not depend on market performance.
• Provides survivor benefits to the spouse or dependents of the employee.
• May provide medical benefits to retired employees.
• Can be a valuable tool for attracting and retaining employees.

Disadvantages of Old Pension Scheme

• No flexibility or portability.
• Pension amount may not keep up with inflation.
• Pension amount may not be sufficient for long-term retirement needs.
• No control over pension fund investments.
• Potential for mismanagement by the government.
• No lump sum payout option.
• May not be suitable for employees with short-term employment.
• No option to choose the pension fund manager.
• Pension amount may not reflect changes in salary over time.
• May not be sustainable in the long run due to an aging population.

Advantages of New Pension Scheme

• Offers higher returns compared to the Old Pension Scheme.
• Employees can choose their pension fund manager.
• It is Portable.
• Market-linked, which means that the pension fund is invested in various financial instruments, providing employees with higher returns.
• Provides flexibility in contribution amount.
• Contributes to the development of the financial market.
• Helps in the development of long-term savings habits among employees.
• Provides tax benefits to employees.
• Provides a more transparent pension scheme.
• Provides a more sustainable solution for retirement benefits.

Disadvantages of New Pension Scheme

• Subject to market risks and volatility.
• Does not provide a guaranteed pension amount.
• May not be suitable for employees with low-risk tolerance.
• May not keep up with inflation, decreasing the pension value over time.
• May require employees to contribute a portion of their salary to the pension fund.
• May have high fees and charges associated with the pension fund.
• No lump sum payout option.
• May not offer survivor benefits to the spouse or dependents of the employee.
• May be subject to political and economic factors that could affect the pension fund.
• May not be as transparent as the Old Pension Scheme.

Factors to Consider When Choosing Between Old and New Pension Schemes

Here are the factors an individual must consider to make an informed decision about choosing between the Old Pension Scheme and the New Pension Scheme:-

• Age & Retirement Goals:– A person’s age and retirement goals are essential factors to consider when choosing a pension scheme.
• Employment Status:- Employees must check if they are eligible for the Old Pension Scheme or if they fall under the purview of the New Pension Scheme.
• Monthly Pension Amount:- Employees must evaluate if a fixed pension amount is better than a market-linked pension amount and if the amount is sufficient for their retirement needs.
• Fund Management:- Individuals must assess the fund managers’ performance, fees, and charges, and their investment strategy and analyze if it aligns with their goals.
• Flexibility:- Individuals must assess their need for flexibility and portability and check if the New Pension Scheme is more suitable than the Old Pension Scheme.
• Taxation:- Employees must understand the tax implications of both schemes and assess which scheme offers more tax benefits.
• Investment Risks:– Employees must understand the investment risks associated with both schemes and determine their risk appetite before choosing a scheme.
• Survivor Benefits:– Individuals must check if the scheme offers survivor benefits to their dependents and evaluate if that is a crucial factor to consider.   

Most Popular Pension Schemes

These are some of the most popular pension schemes offered by the central and state governments in India are as follows:-

Benefits Of Old Pension vs New Pension Scheme

The benefits of this article are as follows:-

• This will help individuals understand the difference between the old and new pension schemes.
• This article will provide clarity on how the schemes work.
• People will be able to make an informed decision on which scheme they should choose.
• This explains the eligibility criteria to avail of pension benefits.
• This explains the contribution and withdrawal process.
• People will be able to understand the tax implications of both schemes.
• This provides information on the management of funds in both schemes.
• People will be able to understand the importance of survivor benefits.
• This provides information on the flexibility of the schemes.
• It will help people plan their retirement better and make informed decisions.

Features Of Old Pension vs New Pension Scheme

The features of this article are as follows:-

• The article explains the differences between the Old and New Pension Schemes.
• It highlights the features of both schemes.
• It explains the eligibility criteria for both schemes.
• It provides information on the contribution process.
• The article explains the withdrawal process.
• It discusses the fund management strategies used in both schemes.
• The article explains the tax implications of both schemes.
• It highlights the importance of survivor benefits.
• It explains the flexibility features of both schemes.
• The article helps individuals make informed decisions about which scheme they should choose.

Old Pension vs New Pension Scheme Eligibility Criteria

The general eligibility criteria for each pension are as follows:-

• Old Pension Scheme:-
  • The applicant must be a citizen of India.
  • He or she must be a civil servant, police personnel, military personnel and other government officials.
  • The age limit must be 65 years.
  • he or she must have paid the premium amount of the pension scheme.
  • The minimum no. of servicing must be 20 years.
• New Pension Scheme:-
  • The applicant must be a citizen of India.
  • The age limit must be 18 to 65 years.
  • He or she must have opened the NPS Account.
  • The applicant must be employed or self-employed.
  • He or she must not hold any criminal record.

Important Documents 

Some of the important documents required to apply online for this scheme are as follows:- 

• Old Pension Scheme:-
  • Employee Provident Fund (EPF) Account
  • Service Records
  • Salary Certificate
  • Pension Payment Order (PPO)
  • Bank Account Details
  • Aadhar Card
  • Address Proof
  • Identity Proof
  • Pension Application Form
  • Medical Certificate (if applicable)
• New Pension Scheme:-
  • Permanent Retirement Account Number (PRAN) Card
  • KYC Documents
  • Duly Filled NPS Application Form
  • Bank Account Details
  • Nomination Form
  • Initial Contribution
  • Subscriber Registration Form
  • Photographs